The Ethanol Shuffle and other bad ideas

Have you heard of the Ethanol Shuffle? One step forward, two steps back.

Actually, it’s not a dance; it’s part of California’s clean energy policy - a program Washington Governor Jay Inslee wants to emulate.

Gov. Inslee recently signed a pact with California, Oregon and British Columbia pledging to support cap-and-trade, carbon taxes and low-carbon fuel standards as part of his climate change agenda.

Why should you care? Because you will be paying the bill.

The governor’s own consultants estimate that his low-carbon fuel regulations will increase gasoline and diesel prices $.98 to $1.18 per gallon. Not surprisingly, that is complicating legislative efforts to increase our state’s 37 cent/gallon fuel tax by 11.5 cents to fund transportation improvements. If both measures pass, Washington drivers could be paying $4.50 to $5.00 a gallon.

California appears to be the model for Gov. Inslee’s climate change legislation. As it happens, that state has much to teach us - namely, that low-carbon fuel standards are costly and unworkable.

California is the only state in the nation with a low-carbon fuel standard. Enacted in 2007, the program seeks to reduce the amount of carbon emitted by gasoline and diesel by 10 percent by 2020.

The technology to achieve that goal didn’t exist in 2007, but because the limits took effect gradually, bureaucrats presumed the technology would be available by the time it was needed. Unfortunately, that didn’t happen, and now California’s refinery system is in turmoil - and consumers are on tap to pay the price.

This is what happened. For a couple of years, California refiners were able to comply with the regulations, either by blending Midwest ethanol in their fuel or by purchasing “credits” that benefit electric or hydrogen-powered vehicles.

But, as California’s carbon limit became more severe, refiners could no longer comply using corn-based ethanol.

That’s where the Ethanol Shuffle comes in.

California’s rules give preference to Brazilian ethanol made from sugarcane, saying it’s better than corn-based ethanol at reducing the carbon-content of gasoline.

The Renewable Fuels Association finds that ruling puzzling considering that sugarcane farmers in Brazil burn their fields each year, releasing tons of greenhouse gas emissions, then ship most of their product to market in trucks. Brazilian ethanol must be shipped almost 8,500 miles to the U.S.

Still, to get maximum compliance credits, California refiners import Brazilian ethanol rather than use American ethanol. But there’s a problem.

Brazil needs ethanol for its own use, so the U.S. sends American ethanol to Brazil, while Brazil sends it sugarcane ethanol to us. The Ethanol Shuffle.

Leaving aside the additional transportation costs, the Renewable Fuels Association estimates that the transportation-related greenhouse gas emissions of the Ethanol Shuffle are more than double the level they would be if each country used its own ethanol.

But it gets worse. A study by the international Boston Consulting Group estimates that, by 2015, there won’t be enough sugarcane ethanol or electric car credits available to allow refiners to meet California’s ever-lower carbon fuel standard. At that point, California refineries can either go out of business or sell their fuel outside the state, creating a fuel shortage in California that will drive up gas prices and reduce gas tax revenues to the state.

As we consider our own environmental policies, we should remember two things. First, Washington is not California. Our problems are not as severe, so any benefits that result won’t be worth the cost. We don’t need to import California’s draconian regulations or repeat their mistakes.

And second, while ideals are good, policies must be tempered by common sense and an understanding of their true cost.

Is that too much to ask?

- Don C. Brunell is president of the Association of Washington Business (www.awb.org).